Nine Tips For Buying At a Property Auction
By Peter Sarmas on 22 Aug 2013
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Buying a house at auction can be a nerve-racking experience – especially if it’s your first time!
From negotiating the house price to the process of placing a bid, there is a lot you need to know about buying at auction. Read on for our list of 9 auction tips for buyers to help you through the experience.
1. Finance
When considering buying at auction, a good place to start is at the bank.
Before you even start looking for a house, ensure all your finances are in order. If you are borrowing from a bank or other lender, seek pre-approval first for an idea of how much money you have to spend. This will help you to know your limit, so you will feel more comfortable when it comes to negotiating house price and bidding on auction day.
2. Inspection
Like with any other house purchase, a thorough inspection prior to the auction is incredibly important – it cannot be underestimated.
While most auctions will let you take a walk through the house on auction day, you need to have inspected the property at least once prior to this day. If you can, go a few times. This way you will not only get a better feel for the property (and the neighbourhood, if you go at different times during the day), but you are likely to notice other things about the house you may miss on your first viewing. You may want to consider hiring a building inspector to examine the house for any major structural faults faults and that the house meets state building codes.
3. Register Your Interest
If you are serious about bidding at auction – do not forget to register your interest with the agent! This is very important because many auctions require you to register your interest prior to the auction date in order for you to place a bid, but remember, registering your interest in no way means you are obliged to make a bid. Also, even if you have registered you may still need to show formal identification on the day. A driver’s licence that shows your name and address should be sufficient in most cases, so make sure you have yours with you on the day. A number of agents make this registration process mandatory to exclude “tyre kickers”.
4. Legalities
This point goes for all house sales, not just property auction tips! Before the big day, take the time to visit a solicitor to review the contract of sale. Make sure that you know exactly what is included. All fittings, furniture and any other relevant items should be clearly listed. If you and the seller make any other negotiations, ensure that they are listed as well, and have your solicitor or conveyancer check that all the documentation is in order.
5. Know The Rules
When bidding at auction, it is very important to know the rules and understand how the process works and familiarise yourself with the jargon. If you are planning on bidding on a house at auction, attend another one beforehand for an idea of what you can expect. Auction laws differ from state to state. For auctions in Victoria, take a look at the Consumer Affairs guidelines to Victorian auction laws.
6. Know The True Value
As with any house, before you buy it is important that you know the true value. Do your research on the suburb you are looking to buy in. What have the recent sales been like? Do house prices seem to on the rise or does it more look like they are on the decline? The house itself, what sort of condition is it in? Does it look like it will need some work in the near future? Consider employing an independent valuer to help you out with this one – although it will initially cost you extra money in the short term, it could result in you saving money long term.
Source: Gregor Dodson via Flickr
7. Don’t Hesitate
While bidding at auction can be daunting, remember that you are there for a reason, so don’t waste your time. Get involved! If the property is passed in, meaning that the bidding does not meet reserve price, the highest bidder then receives the opportunity to negotiate with the seller without any competition – and ideal position to be in. If you do not bid, you could lose your chance completely.
8. Know When To Stop
Perhaps one of the most important of auction tips for buyers is to know when to stop. Before the day of the auction, decide on a definite, final price – and stick to it! For an inexperienced bidder it can be easy to get caught up in the moment during an auction. You need to stay level-headed and unemotional during the whole bidding process. Even if it looks like the property is going to sell for just over your “walk away” price, this difference could escalate quickly when bidding and result in thousands over what you were realistically willing to pay.
9. Consider a Buyers’ Agent
If you don’t feel confident bidding at auction, or still feel unsure of how to negotiate house price, you may want to consider a buyers’ agent. Experienced buyers’ agents attend and bid at auctions on a weekly basis and are paid for their expertise in the field. They have an in depth knowledge of how the process works, and will be able to help you achieve the best possible outcome.
